What if state funds don’t come through for hotel projects?

August 24, 2013

SARANAC LAKE - Two major hotel projects in this village became public within less than two weeks of each other. Both are now vying for millions of dollars in state economic development funding.

What happens if the projects, which some have described as a once-in-a-lifetime opportunity for the community, don't get that state money? Will they still move move forward? What other options could they pursue? And why did both of these major developments come about at almost the same time? Was it just coincidence?

Those are some of the questions the Enterprise has tried to have answered in recent conversations with Chris LaBarge, the Malone real estate broker and developer who announced plans on July 24 to build an upscale 90-room hotel on Lake Flower, and Fred Roedel III, whose company announced on Aug. 5 that it plans to buy and renovate the Hotel Saranac.

Chris LaBarge outlines details of the architectural design of his proposed 90-room hotel on Lake Flower at a village Planning Board meeting earlier this month.(Enterprise photo — Chris Knight)

---

Lake Flower hotel

LaBarge has said his proposed hotel, which would be built on the site of three Lake Flower Avenue motels, would cost $15 to $18 million. He told the Enterprise recently that he is seeking $2.2 million in state funding through an application filed earlier this month with the North Country Regional Economic Development Council.

Article Map

Why does he need the state money?

"When you buy three businesses on the water, there's a significant land cost," LaBarge said. "Then you have asbestos abatement, demolition, as well as meeting some of the objectives of the (village's Local Waterfront Revitalization Plan) and comprehensive plan. So we're saying there is some cost associated with meeting the objectives of the different plans, as well as the high cost of the property to build the project on, that there is an amount of funding that would be needed from the grant application to help offset that."

LaBarge stressed that he's not seeking the maximum amount he could have asked for.

Article Links

"We're only asking for the amount to make our feasibility plan economically viable," he said.

Asked what would happen if the state money doesn't come through, LaBarge said there are two options.

"We would say, if we didn't get it, 'Is there a way to scale the project back and still make it economically viable?' If we weren't able to do that, then we would have to step away from the project."

Asked last month if he would seek tax incentives, like a payment-in-lieu-of-taxes plan, LaBarge said that hasn't been determined, but "if we do, we will not request anything less than the current taxes on that property today."

---

Hotel Saranac

Until this week, Roedel hadn't revealed the total amount his company plans to invest in buying and restoring the Hotel Saranac.

"We expect it to be a $13 million project," Roedel told the Enterprise Tuesday. "Our company is prepared to put up the $8 million because that's what the hotel, when it's operating properly which we believe we'll get it to, can support $8 million. But it will take $13 million to make it right.

"We've worked through a budget on this project, and there's a gap that needs to be addressed, and that's what we've asked the state to fund."

Roedel said the "optimum solution" to close the gap would be the $5 million state grant his company has applied for. If it doesn't get it, he said there are other options to pursue, like tax credits and PILOT programs.

Roedel Companies has been talking with the Franklin County Industrial Development Agency about what financing help it could provide on the project, according to IDA Executive Director John Tubbs.

"The IDA is able to provide bonding. It's able to provide a PILOT and, in so doing, provide sales and use tax exemptions, mortgage recording tax exemptions and provide an abatement for real property tax," Tubbs said. "Until things move forward a little farther, we don't know what kind of a role the IDA will play, but we're ready to play one."

Roedel traveled to Saranac Lake this week from his company's Wilton, N.H. headquarters for a meeting with village Mayor Clyde Rabideau and Empire State Development President and CEO Ken Adams. The meeting came a day after Rabideau was on a conference call about the Hotel Saranac deal with Adams and Gov. Andrew Cuomo.

Rabideau said part of the reason why he reached out to state officials for help is because the $5 million Roedel Companies is seeking is "more than what is normally given out during this round of funding and this type of funding.

"We're just trying to be creative and get Ken Adams up to speed and look at different ways to make it go," the mayor said. "It's very early in the process, and we're all committed to helping as much as we can."

Asked why the government should chip in for a project proposed by a private developer, Rabideau said "because the money's there waiting for them, and if they ask for it, they generally get it."

"We're pursuing it because it's available," Roedel said. "We believe and know that the impact from this project will be significant to the village and the community, and there's some valuable return for the state of New York if they can see it that way."

---

State process

The deadline to submit applications for round 3 of the state's Regional Economic Development Council competition was Aug. 12. Applications will now go through several steps, including eligibility determination and scoring by the regional councils and state agencies applicants are seeking funding from.

Up to $760 million in state funding and tax incentives has been made available in this year's competition. All "priority" and "regionally significant" projects will be made public on Sept. 24, and an announcement of grant awards will be made later this year.

What are the chances of both hotel projects getting funding? North Country Regional Economic Development Council Co-Chair Garry Douglas wrote in an email that he couldn't discuss pending or anticipated funding applications.

"However, as president of the North Country Chamber (of Commerce), we look forward to working in support of both developers in every way we can," Douglas said. "Each of these proposals demonstrate confidence in the region and in Saranac Lake by major, qualified investors."

Could the fact that two different hotel projects are seeking state money hurt their individual chances?

Rabideau said he hopes that isn't the case because "the way we're going about this is presenting these projects as a package.

"We haven't gotten a dime in the last two go-arounds, and we hit the jackpot with these two proposals, so we're asking the state of New York to ante up," the mayor said. "Why not Saranac Lake? I've never asked the governor or the state of New York for a dime. Now it's our turn."

The Enterprise tried to obtain copies of the funding applications filed by the two hotel developers, but was told by Empire State Development that the documents are confidential until the award announcements are made. Asked whether the records would be available through a Freedom of Information Act request, the newspaper was told they would likely be denied under a clause in FOIL that allows agencies to withhold documents that would, "if disclosed, impair present or imminent contract awards."

---

The timing

LaBarge and Roedel know each other and have worked together in the past, but the timing of their announcements - made within 13 days of each other - appears to be largely coincidental. If anything, it may be tied to the fact that the village Board of Trustees planned to pass resolutions supporting funding applications for both projects and had to do it at a public meeting, which it did Aug. 5.

"Fred Roedel III has been in the hotel industry for some time, and one of their builders, RGH Hospitality, actually constructed my Holiday Inn Express in Malone," LaBarge said when asked about any connections to Roedel Companies. "They did manage the hotel for a period of time. They're a well-established hotelier company in the Northeast region and they do a great job."

LaBarge had tried to buy the Hotel Saranac but said he couldn't come to terms with its owners, the Arora family. He said he thinks his proposed Lake Flower hotel would complement, not compete with, a restored Hotel Saranac.

"My partners and I are confident that we're really appealing to two different groups of people," LaBarge said. "Those that desire a downtown historic setting from a hotel is one group of people, and those that are desiring a spa-resort experience on the water with access to those natural resources is a different group of people."

Roedel said he knows LaBarge "pretty well" and also talked about how their companies worked together on the Holiday Inn Express in Malone.

"He's a good guy, but I really know nothing about his (Lake Flower hotel) project," Roedel said. "We haven't addressed whether we think it will impact ours or not. I think he's got different challenges with his than we do with ours. What we're looking at here is the opportunity to restore and rehabilitate a historically significant asset in the community, to provide some significant economic impact with a pretty quick turnaround."

---

In the meantime

As they wait to hear about their funding applications to the state, both developers are trying to finalize their plans. That road may be much shorter for Roedel than LaBarge, given the multiple agencies that will be involved in the review process for the proposed Lake Flower hotel.

LaBarge initially applied to the village Zoning Board of Appeals for a series of variances for the building's height, shoreline setbacks and parking lot. He's since withdrawn those applications and is pursuing rezoning of the property to a planned unit development district, a process that the village added to its land use code in 2011 but has yet to be used. A sketch plan meeting with the village Planning Board is set for Sept. 18.

LaBarge will also need permits from the Adirondack Park Agency, Department of Environmental Conservation and other state agencies. If all the necessary approvals are received in the next six months, LaBarge said construction of the hotel could begin in the spring.

Roedel Companies' plan to buy and restore the Hotel Saranac likely wouldn't require approval of the planning board because there wouldn't be a change in use of the building, said village Community Development Director Jeremy Evans.

Roedel has a signed letter of agreement with the Arora family that spells out the terms and conditions of the sale. How close is that deal to being finalized?

"We're in position to move very quickly," Roedel said this week. "We have a very short timeline with the current owner, and if everything can work out properly we would expect in the next 60 days that the property would be in full swing with design, and we'd begin actual work. Our goal would be to get it opened next year."